News | June 2025 | Government unveils new tax simplification measures for 2025

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June 2025 | Government unveils new tax simplification measures for 2025

The government has announced a package of reforms aimed at simplifying the tax and customs system as part of its 'plan for change'. The update includes 26 new measures, along with two additional administrative changes intended to strengthen the integrity of the tax and customs framework.

A further 11 measures are intended to bring changes to the tax system to ensure "it continues to be fit for the modern world". The expectation is that the measures will reduce bureaucracy and increase efficiency at HMRC, so the state can become more "productive, agile and effective".

The measures come after commitments in the Autumn Budget 2024 and the Spring Statement 2025 to bring forward these changes in Spring 2025.

WHAT MEASURES HAVE BEEN INCLUDED?

The measures are relatively wide ranging, with too many to mention in a single article. But the key ones, which have been designed to help simplify the tax and customs system, are outlined below. You can find the full list at Gov.uk.

Employers and small businesses should see their administrative burdens reduced, as HMRC works to modernise its systems to improve the experience for everyone that deals with it, including individuals and sole traders. This push towards simplification should also extend to HMRC guidance and communications.

CAPITAL GOODS SCHEME SIMPLIFICATION

Legislation will be laid before Parliament to remove computers from assets covered by this scheme, which will reduce administration as they would have previously had to adjust VAT recovery on these assets over a five-year period if the cost of them was more than £50,000 excluding VAT. Removing these from the measure means these calculations would no longer be needed.

The capital value expenditure of land, buildings and civil engineering work will also increase from the current level of £250,000 excluding VAT, to £600,000 excluding VAT. So, only projects above the new threshold would need to adjust VAT over the standard 10-year period, reducing compliance requirements for mid-sized capital projects.

INCOME TAX SELF-ASSESSMENT (ITSA) CRITERIA REVIEW

Previously, anyone with trading income above £1,000 had to file a self-assessment return. But under the new measures, the threshold for reporting trading income will be aligned with new ITSA reporting thresholds for property and 'other' taxable income, HMRC said, raising it to £3,000 gross. The Government claims this will remove the requirement for 300,000 taxpayers to file a self-assessment return, making it much easier for those with small incomes from side gigs, such as freelancing or selling online.

However, you may want to file a self-assessment return if you need to reclaim tax for work expenses, so speak to your accountant if you think you would still be better off filing if you're in this position once the legislation takes effect.

BENEFITS IN KIND MUST BE DEALT WITH THROUGH PAYROLL FROM APRIL 2027

The mandatory reporting of most Benefits in Kind through the payroll system of businesses was due to begin from April 2026. But following consultation with the Administrative Burdens Advisory Board, the Institute of Chartered Accountants of England and Wales and the Employment and Payroll Group, the "introduction of mandatory reporting and paying of Income Tax and Class 1A National Insurance contributions (NICs) on benefits in kind via payroll software" has been delayed by a year.

When the measure takes effect, company cars, private medical insurance, and gym memberships, for example, would need to be reported to HMRC through the payroll. Other benefits, such as employer-provided accommodation or interest-free or low interest loans from employers for things like rail travel season tickets, do not have to be included from this date, but can be included voluntarily if desired.

HMRC plans to further engage with how these rules will be applied so any disruption to employers is kept to a minimum, and the delay will give employers more time to prepare for the changes before they come into force.

These delays add to the announcement on January 28 that the draft Income Tax (Pay As You Earn) (Amendment) Regulations 2025, which were initiated by the previous Conservative government, will be scrapped. This saves employers from needing to add more detailed employee hours information to HMRC, which was due to begin from April 2026.

GETTING NATIONAL INSURANCE CONTRIBUTION REFUNDS TO BE MADE EASIER

HMRC is also in the process of reviewing the process for refunding National Insurance Contributions (NICs) under the Annual Maximum rules by streamlining the claims process and accelerating the processing time taken for each claim. This should make it easier and faster for people who are due refunds to access them.

Another NICs-related change is that the Government plans to enhance the Check Your State Pension forecast service, which helps people who need to fill in gaps in their NICs record by paying voluntary NICs. This builds on the Spring Statement 2025 announcement that from this summer, employees who become liable to the High-Income Child benefit charge, will be able to pay this directly through PAYE and will not need to file a separate self-assessment.

These are just a few of the measures that were announced by the Government in relation to increasing the simplicity of tax and NICs, but you can find out more about other measures at Gov.uk or by speaking to your accountant.

CONTACT US

If you want to find out more about the measures that have been announced, then please get in touch with us on 01709 327 215 or email info@branagans.co.uk and we will do whatever we can to help.